Joint efforts of insurance and banking regulators over the past several years have provided the foundation for effective communication and coordination between the state insurance departments and the Federal Reserve System, as envisioned by the Gramm-Leach-Bliley Act, according to the nation’s state regulators.
The National Association of Insurance Commissioners, at its summer meeting in Boston. cited as the latest product of this partnership a new report by the NAIC/Federal Reserve System Joint Troubled Company Subgroup that compares the state insurance and FRS banking regulatory frameworks for identifying and supervising companies in weakened financial condition.
The subgroup was formed in 2000 to establish a working relationship with the FRS in anticipation of new financial holding companies being created under provisions of the GLB Act. The subgroup was one of four joint subgroups established by the NAIC and the FRS to address implementation of the GLB Act. This act permits wider latitude for insurance companies, banks and securities firms to operate within a single financial holding company and mandates the coordinated supervision of entities within an FHC by the financial sector regulators.
The scope of the report was generally limited to financial soundness monitoring and the supervision of financially weakened institutions.
“The frameworks for identifying and supervising financially weakened companies used by state insurance regulators and the FRS have many similarities,” said Steve Johnson, Pennsylvania deputy insurance commissioner and chair of the subgroup.
“While the U.S. has not experienced wide-spread creation of financial holding companies with insurance underwriting operations, our collaborative efforts demonstrate our willingness and ability to readily coordinate the supervision of the financial services industry,” added Johnson.
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